Global
sentiment was initially supported by reports that the United States and China
would potentially be restarting trade talks in a bid to de-escalate tensions.
However, this optimism was later squashed by news that US President Donald
Trump is considering imposing tariffs of 25% on $200 billion of imported
Chinese goods.
These
latest developments have yet again displayed how inherently unpredictable the
Trump administration has been on trade. While there is a possibility that
investor complacency kicks in as trade developments drag on, it must be kept in
mind that a trade war presents a major threat to global stability. Asian shares
have closed mixed while European stocks drifted lower as uncertainty over US -
China trade tensions weighed on risk appetite.
Sterling waits
for BoE policy decision
The
Pound’s response was fairly muted today despite activity in the UK
manufacturing sector cooling to a three-month low at 54.0 in July.
It
seems investors are more interested in Thursday’s BoE policy meeting and
whether the central bank moves forward with an interest rate increase. Even if
the BoE pulls the trigger in August, there is a suspicion that this could be a
one-and-done hike. With inflationary pressures cooling and Brexit uncertainty
grating on sentiment, the central bank is likely to hold off any further
monetary policy normalization this year.
Dollar steady
ahead of FOMC meeting
The
Dollar has nudged higher against a basket of major currencies ahead of the
Federal Reserve monetary policy announcement that is due to be made later
today.
Investors
will closely scrutinize the policy statement for fresh insight into the US’
economy and monetary policy. Market expectations over the Federal Reserve
raising interest rates two more times this year could be reinforced if the Fed
adopts a hawkish stance.
Prior
to the Fed meeting, much attention will be directed towards the ADP Employment
Report for July which could offer insight into the health of the labour
markets. A figure that meets or exceeds market expectations of a 186k increase
may provide some additional support for the Dollar.
Commodity
spotlight – WTI Oil
Oil
prices have extended losses today after an unexpected build in US Crude
stockpiles encouraged sellers to attack the commodity. With Crude Oil posting its
biggest monthly loss since July 2016, could the party be coming to an end for
bulls? The technical perspective is displaying signs of exhaustion from the
bulls, with prices failing to keep above the stubborn $70 resistance level on
repeated occasions. A solid breakdown below $67.70 could inspire a decline
towards $67.00 and $66.60, respectively.
Bitcoin tumbles
below $7800….
It is
shaping up to be a horrible trading week for Bitcoin thus far, thanks to a
string of negative news and developments eroding investor appetite for the
cryptocurrency.
With
prices crashing below the $8000 level and trading around $7570 as of writing,
could this rebound transform into a dead cat bounce? Technical traders are
likely to closely observe how prices behave above the $7500 level. Sustained
weakness below this region could trigger a decline towards $7260. For bulls to
jump back into the game, Bitcoin needs to secure a daily close above $8000.
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